JAYPEE INFRATECH LIMITED

[venkatsalem]

Please provide your views on JAYPEE INFRATECH LIMITED IPO.

[chetan]

Here You Go Sir,

REVIEW is here http://www.dalalstreet.biz/ipo/2010/04/jaypee-infratech-ipo-investment-decision/

Brokerage Reviews will be posted soon.

[sunil]

Views of Angel Broking Analysts Shailesh and Aniruddha,

Jaypee Infratech (JIL) is constructing the 165km stretch (Yamuna Expressway Project - 69% completed) and planning real estate development at five locations (approx 530mn sq ft from land reserves of around 254mn sq ft) alongside the Expressway over the next few years. This is one of its kind business models among the listed players, wherein shortfall in the toll revenue would be compensated from the realisations from the Real Estate space. We have assumed a ten-year development period for the company's existing land bank (530mn sq ft) and have assumed average realisation of Rs4,000/sq ft and Rs8,000/sq ft on JIL's saleable interest in Residential (50%) and Commercial (33%) property, translating into a Fair Value of Rs95/share. Thus, the IPO is available at a premium to our NAV. Hence, we are Neutral on the IPO.

[sunil]

Sharekhan in its Report says,

In terms of valuation, the net asset value per share works out to Rs115 (on fully diluted equity of 138.8 crore shares), which is close to the higher end of the issue price band of Rs102-117. However, there is potential for upside in the stock’s valuations if the company is able to monetise its land bank at a much faster rate and higher than expected realisations.

[sunil]

Sushil Finance and Dalal & Brocha Research houses have a NEUTRAL View on the IPO.

Uniocn Research has a SUBSCRIBE with the Following View,

Jaypee at the upper price band (pre-issue) is valued at 22.8x (19.9x on lower band) of its annualised FY10E EPS of INR 4.87. On P/BV basis, at the upper band JIL is valued at 7.2x. JIL, as such is not comparable with other companies, given its unique business model of developing real-estate across the Expressway while creating demand for integrated township by providing state of the art infrastructure and will accordingly command premium over its peers. Valuation looks tad expensive from the near term perspective, however, given the a) overall business model of JIL, growth coming from stable revenue flow from the Expressway (FY12 and onwards) and from its Real-estate development, b) strong support from the Group and c) track record of the group to achieve milestones in their projects, investor can subscribe and add to its portfolio for long term value accretion.

[sunil]

Views of IndiaBulls Financial Services

We have valued JIL using net asset value method and arrived at a value of Rs. 126 per share, providing a 23.5% upside on the lower price band of Rs. 102, assuming a WACC of 13.3%. As the Company is an SPV indulging in road construction as well as real estate, it has no immediate listed peer company. However, if we compare it to the infrastructure companies involved in road construction (like IVRCL, Gammon, Simplex, Patel Eng., L&T, Madhucon, etc.), we find that the proposed price-to-book (P/B) for FY11 of 3.2x on the lower band is at a slight premium to the average of 2.9x of the peer. However, such a premium in our view, is justified as the earnings would increase at a faster pace beyond FY11 from toll revenue and the real estate development and thus, boosting the net worth. Therefore, we find the issue has a good investment opportunity with long-term perspective and thus, recommend our investors to subscribe to the issue.

[sunil]

HDFC Securities views on Jaypee Infratech,

Jaypee is yet to commission its expressway project and collect tolls. The ongoing project is running ahead of schedule and provides comfort with regard its execution. Revenue in the fiscal ended March 2009 (FY09) has come from sales of undeveloped plots to group companies. Net sales of Rs 525.50 cr and net profit of Rs 398.85 cr was derived from sales of developed plots in the first nine months ended December 2009. The annualised EPS was Rs 3.8 for the nine months ended December 200 on a fully diluted equity.

As JIL's business model is development of infrastructure (expressway) along with ribbon development of real estate, there is no listed comparable peer. The offer price of Rs 102-Rs 117 discounts the annualised EPS for the nine months ended December 2009 by 26.7-30.6 times. Retail individual bidders will get a discount of up to 5% to the issue price. JIL’s business could take time to take off as such projects have a long gestation period. While there is potential for upside in the stock’s valuations if the company is able to monetise its land bank at a much faster rate and higher than expected realisations, the key risk includes a downturn in the real estate market. High-risk investors could subscribe to the IPO at the lower price band.